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Thursday, October 8, 2009

Toyota May Avoid Prius Delays With Panasonic Deal

Toyota Motor Corp., whose Japanese customers wait eight months to buy a Prius hybrid car, may avoid longer delays in the future thanks to Panasonic Corp.’s pending takeover of Sanyo Electric Co.

As demand grows for electric and gasoline-electric hybrids, a shortage of the batteries used in the vehicles may force automakers to compete for supply. Toyota, which aims to offer hybrid versions of all its models sometime after 2020, may find it easier to do so after its partner Panasonic makes Sanyo a subsidiary.

“There will be severe competition for batteries starting from 2011 or 2012,” said Takeshi Miyao, Asia director at auto research firm Carnorama. “What Toyota fears most is that battery companies may gain selling power.”

Panasonic and Sanyo, both based in Osaka, together account for about 80 percent of all batteries used in hybrid vehicles worldwide, according to Ashvin Chotai, London-based managing director of Intelligence Automotive Asia Ltd.

General Motors Co., Honda Motor Co. and Nissan Motor Co. all plan to introduce new hybrids and electric vehicles. Detroit-based GM gets batteries from South Korea’s LG Chem Ltd. for its Chevrolet Volt, scheduled to go on sale next year, and Yokohama-based Nissan has a battery joint venture with NEC Corp.

Toyota, the world’s biggest seller of hybrids, is expanding battery production at Panasonic EV Energy Co., a joint venture owned by the carmaker and Panasonic since 1996, because of growing demand for its Prius model.

Rising Demand

“At this point, we think the batteries we develop with Panasonic are the best and we will continue” using them, Toyota’s former executive vice president Masatami Takimoto told shareholders in June. “But if there are attractive batteries from other companies, we may use those, too.”

Government rebate programs encouraging customers to trade in old vehicles for more fuel-efficient ones have added to the demand that’s forcing customers to wait for their Priuses. Toyota registered 77,000 new Prius cars in Japan between May and the end of August, compared with a monthly sales target of 10,000. In the U.S., new sales of the model rose more than 20 percent to about 62,000 in the four months to September.

“We are extremely sorry for causing a delay,” Toyota’s President Akio Toyoda said on June 25. “We are trying our best to keep up with the unexpectedly strong demand.”

Customers in Japan wait one month for Honda’s Insight hybrid car, according to the Tokyo-based carmaker.

Toyota rose 1.7 percent to 3,500 yen as of 1:05 p.m. in Tokyo trading. Panasonic gained 1.6 percent while Sanyo was unchanged.

Awaiting Approval

Panasonic won conditional European Union approval on Sept. 29 to take over Sanyo for 806.7 billion yen ($9.1 billion), the largest offer in the history of Japan’s consumer-electronics industry. The European Commission cleared the deal provided that Panasonic divest some battery production.

Japan’s Fair Trade Commission also gave conditional approval for the Sanyo takeover last month. The bid, announced last December, still needs approval from the U.S. and China.

Sanyo, which has been providing batteries to Honda’s Insight, has said it plans to supply them to various automakers even after the takeover. Still, Honda, Japan’s second-largest carmaker, and JS Yuasa Corp. set up a joint venture in April to make lithium-ion batteries for hybrid cars in western Japan in the fall of 2010.

“It shows that Honda is being cautious that Sanyo will become a subsidiary of Panasonic, which is Toyota’s partner,” said Hidemitsu Umebayashi, an analyst at Daiwa Institute of Research. “Automakers other than Toyota may be keeping a distance from Sanyo.”

Carmakers Find Partners

Other Sanyo customers are also tapping new partners. Volkswagen AG formed a partnership with Toshiba Corp. to work on batteries for its electric car, while Ford Motor Co. is buying batteries from Johnson Controls-Saft, a joint venture between U.S.-based Johnson Controls Inc. and France’s Saft Groupe SA.

It may be difficult for Sanyo to supply batteries to multiple automakers, as carmakers prefer forming joint ventures to control costs, Umebayashi said. For a battery-maker, profit for vehicle batteries typically ranges between 7 percent and 10 percent. In a venture, it comes down to 5 percent as automakers try to cut costs, he said.

Panasonic EV will first expand production of batteries to 800,000 from 500,000 this year and will open a third factory in Japan’s Miyagi prefecture next year to have a total nickel-metal hydride battery production capacity of about 1 million units.

Toyota Hybrid Plans

Toyota plans to introduce four new gasoline-electric hybrid models in Japan and three overseas by the end of March. It also plans a low-cost hybrid, smaller and cheaper than the Prius, as well as an electric car in 2012.

The company is also developing lithium-ion batteries, which can be used for longer cycles before recharging. The automaker plans to use lithium-ion batteries for plug-in hybrids, to be sold later this year.

“Batteries are the key technology which will decide the fate of automakers,” Toyota Senior Managing Director Toshio Furutani said.

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